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Best Practices - Branch Ops
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Sx.e AIM

• Grant Howard
• Grant W. Howard Company

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• Grant Howard
• Expert on Inventory Management, System
  Utilization and Getting Results
• Works with Multiple Distributors, Associations
  and Software Houses
• Conceptual Designer Behind Sx.es AIM
• Sits on Multiple Board of Directors
• Founder of Grant W. Howard Company

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Our Discussion Today

• Company Objectives
• Inventory Management Objectives
• Inventory Management Model
• Branch/Ops Involvement
• Branch/Ops Tools

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Company Objectives
Profitability
Longevity
Growth
Bottom Line Profits (PL) GM and Oper.
Efficiency Asset Management
Customer Service Retention Maintain the base
Employee Happiness
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IM Objectives

• Customer Service
• Availability (Fill Rates)
• Proper Backorder Handling
• On Time Delivery
• Accuracy Item, Quantity, Price

• Profitability (ROI)
• GM Improvement (Sales and Cost)
• Freight Considerations - OC Analysis
• Efficiency Asset Mgt CtoC and CtoP
• Surplus Inventory Safety Inventory
• Turns/Days supply, ROI/TE/GMROI

Watch the C to P (Purchasing/Replenishment,
Receiving Put-away, A/P)
Watch the C to C (Warehousing, Handling, Obsol.
Shrink, Taxes, Ins, Interest)
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Service - Fill Rates

• How well a business meets its customers needs -
  pulse of customers happiness/loyalty.
• What to Measure
• Fill Rates Shipped/Ordered
• Quantity 9 out of 10 90
• Line Item SC 9 out of 10 0
• Order Ship Complete?
• What Should Fill Rates Be?
• The Report is Broken - Look at First Pass
  Orders - EDI, Fax, Internet, etc for true fill
  rates and backorder retention
• Only one way to better Fill Rates - The Right
  Inventory. Two ways to the Right Inventory...

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Service Level

• High Service Level
• Maintain/gain customers
• Less B/Os paper float - Save
• Low Service Level
• Lost
• Lost customers

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Inventory Profits

• Low Turns/GMROI/TE
• Kills the bottom line -Cost to carry
• Some inventory not working - steals from
• products really needed- Service Level Suffering
• High Turns/GMROI/TE
• Cost of Purchasing
• Service level may be suffering

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The Replenishment Model
A Good Replenishment Model addresses the two
objectives of Customer Service and Profitability
When to Replenish? What to Replenish and How
much? What is not needed?
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When, What, How Much
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Whos Involved?
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Demand/Usage

• Lost Sales
• Ask what they want
• Canceled B/Os
• Directs to fill in
• Substitutes
• Ship from another whse
• Three Methods to Enter
• 1. While in Sales/Order Entry
• 2. Lost Sales open order
• 3. Sheet, then to LS open order
• What about the fill rate report?

• Sales/Transfer History
• Lost Sales
• Exceptional Sales
• Human input
• Demand/Usage

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Lost Exceptional SalesCritical for Good Demand
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Lost Sales/Exceptional Sale
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How it All WorksProduct Stock Level/PNA

• Level/PNA On Hand less Committed plus Incoming
• On-hand accuracy everyday
• Systems Tools, Processes Procedures, Education
  Understanding
• Good Suggested/Cycle Count Program
• Make the adjustments when you find them
• Accurate committed and incoming everyday
• Paperfloat and Paperflow - Open Transaction
  Summary Report
• Dates and Quantities
• Watch the consignment warehouses
• Use Alternate Inventory Buckets
• DWIADT and DIRTFT
• WMS

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Paperfloat Control
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Surplus Inventory
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Surplus Inventory Disposition

• BOP/GAP - Put of the fire Short or Long Term
• BLP/Sugg Xfers - Use it where you can Long Term
• Teach branches to use LT first. Dont borrow
  stock and put branch in need.
• 1. Stock Balance (X Months Supply) - With
  To branch approval/Before Buy
• 2. Sell Above Cost Customer, Other Distributor
  
• 3. At Cost Sell at cost, Return at cost with
  no charges (freight, restock)
• 4. Below Cost Sell below cost, Return below
  cost and/or with charges
• 5. Sell Above Write-off Cost Garage/Fire
  Sale, Flea Market, Auction House, Liquidation
  House
• 6. Dump at Write-off Cost Donate, Scrap, Dump

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• We have to have Branch, Operations and Sales
  Understanding, Buy-in and Help - TEAM
• Usage/Demand Sales, Transfers, Lost Sales,
  Exceptional Sales, Manual/Automated overrides
• Lead Time P/Os, Transfers, Manual overrides
• Purchasing Net Available On-hand and open docs
  Orders, Transfers, P/Os, Workorders
• Stock List and Excess Prevention/Disposition

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• Getting Results

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B2B

• Procure
• IM and Control
• Operations
• Sales
• Marketing
• Systems and Tech

• Sell
• Sales
• Marketing
• IM and Control
• Operations
• Systems and Tech

• Warehouse
• Operations
• IM and Control
• Systems and Tech
• Sales
• Marketing

Seems to be a Pattern? Where does Management fit
into all of this?
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Back to Basics

• Many distributors DONT
• Set the system up properly
• Feed the system good data
• Understand or Use the system properly
• Clean up bad processes and procedures
• Educate their people on the system or processes
• Help departments work together
• Help work towards common goals
• Yet they think it will all just magically work

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The Foundation Plan of Improvement Back to
Basics Proactive versus Reactive Replace
Inventory With Information
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Branch Priorities

• Sell
• Service the Customer, Proper Backorder Handling,
  OTD and Accuracy of Shipments/Billing
• Lost/Exceptional Sales and Demand/Usage Changes
• Keep the Level Accurate (On-hands and PaperFloat)
• Eyes and Ears ? Communication
• Demand/Usage Speaker/Listener
• Lead-time Who is Listener?
• Stock Level
• Status, Frozen Items, Tmins, and Paths
• Prevention and Disposition of Excess Inventory

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The Tools

• Branch Management Tools - Toolkit
• Open Transaction Summary and CC Monitor (daily) -
  Keeping the stock level accurate
• Lost Sales/Exceptional Sales (Daily and Monthly)
  - Keeping demand accurate
• Customer Service Action (daily) - Providing
  outstanding service, getting backorders in and
  out to the customer - Closed Loop Thinking
• Suppressed with Activity, (Monthly and Daily)
  -Stocking the right inventory
• Top 25 Surplus (weekly) - Reducing surplus and
  improving profitability AND SERVICE

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J D I

• Its too hard to log lost and exceptional sales
• Its too hard to keep the paper work clean
• Its too hard to keep the on-hand correct
• Its too hard to work excess inventory
• Its too hard ...
• If, Its too hard..., The system is broken or
  doesnt have it, We will never get them to do
  that, We dont know how to do that J D I !

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12 Months to Better Service and Profits

• Execution Is the Key - One Action Each Month
• 1. Good Usage Lost/Exceptional Sales, Usage
  Roll-up, Seasonal Trending, DP
• 2. Implement Customer Buying Habits/Average Ship
  Quantities
• 3. Stock Level Accuracy On Hand Integrity and
  Paperfloat Control
• 4. Buyers Control Center Replenish at OP
  Priority, Targets, EB vs LB, One-stop
• 5. Order Cycle Analysis and Proper use of EOQ -
  Understand and Use Properly
• 6. Timeline Analysis Too Late and Too Early
• 7. Smart Inventory Reduction Program, including
  Excess Prevention and Disposition
• 8. Inventory Stocking Policy and Product Add
  Procedure
• 9. Controlled Replenishment Centralized
  Replenishment and Maintenance
• 10. Backorder Policy and Flawless Backorder
  Handling System
• 11. Data and Parameters Smart Parameters (Depth,
  Cost and Hits/Rank Balance), Smart Exception
  Reports and Proactive Maintenance
• 12. Measure and Improve and Dont Measure Just to
  Measure

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Spend your days reacting to the fires... you may
be efficient, but will you be effective? Fire
Prevention ...
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GWHCO

• www.gwhco.org
• Grant Howard
• ghoward_at_gwhco.org
• 734-428-0529 Phone
• 734-428-0593 Fax
• John Cason
• jcason_at_gwhco.org
• 256-830-0676 Phone
• 256-830-0481 Fax

• Our approach involves tailoring the best
  practices in distribution to the specific needs
  of our clients. Our working philosophy revolves
  around building a strong and self-maintaining
  infrastructure by developing a working plan based
  on processes and procedures, education and
  understanding, implementation of tools and
  technology and through communication,
  organizational structure and team environments.

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Q A
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Thank You!